ICRA Nepal has assigned along-term rating of [ICRANP] LBBB+ @(pronounced ICRA NP L triple B plus) and a short-term rating of [ICRANP] A3+@(pronounced ICRA NP A three plus) to the instruments of Arghakhanchi Cement Private Limited (ACPL).These ratings remain on watch with negative implications.
The watch on assigned ratings with negative implications, mainly factor the expected impact of Covid-19 on the demand outlook for construction materials over the near to medium term. Slowdown in economic activities due to the pandemic is expected to result in declined sales with pressure on margins. However, the company’s ability to continue operations in last two months, albeit in a small scale, amid the lockdown provides some comfort. In these months, ACPL was able to book ~50% of average monthly sales of first eight months of FY2020. Additionally, the banking sector regulator’s relaxations so far and expectations of further relief measures from Government, could provide further support. ICRA Nepal would monitor the developments in the sector and the impact thereon on ACPL’s sales, margins, gearing, coverage and liquidity indicators; to ascertain whether further rating action is warranted.
- Strong operational profile
- Comfortable financial profile
- Long track record of operations and healthy sales growth
- Experienced promoters/management; operational synergies by virtue of being promoted by large business groups
- Externalities brought on by Covid-19 could affect key operating parameters; relief measures provided so far only provide temporary respite
- Sizeable proposed dividend likely to pressurise liquidity
- High working capital intensity
- Intense competition
- Vulnerability to cyclicality and seasonal demand
- Risk of regulatory changes
About the company
Incorporated in July 1998 as Dynasty Industries Nepal Private Limited, the company was renamed Arghakhanchi Cement Private Limited (ACPL) in June 2011. ACPL produces and sells clinker and cement with a current installed capacity of 10,56,000 MTPA for clinker and 9,90,000 MTPA for grinding. The company is held by eight individuals from three business groups (the Siddhartha Group–35.0%,the Kedia Group –17.5%,and the Murarka Group –30.0%) and one Indian company,Uma Cement International (17.5%). Its factory is in Mainahiya, Rupandehi District. ACPL currently manufactures OPC and PPC under the brand, Arghakhanchi Cement.
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